We Can Transform U.S. Industry

American industry faces several challenges over the next decade: digging out of the COVID-19 recession, creating high-quality jobs, re-establishing an innovation culture to keep up with (or better yet, lead) global changes in technology and industrial needs, cutting pollution in frontline communities and supporting strong and inclusive economic growth. These seemingly disparate goals can be advanced together by policies and investments to reduce industrial greenhouse gas (GHG) emissions rapidly, as the House of Representatives’ Select Committee on the Climate Crisis proposed earlier this month.

In its detailed and ambitious report, the Select Committee offers dozens of solutions and policy recommendations. If implemented, these recommendations would meaningfully address the climate emergency across the U.S. economy, including a specific plan to achieve a net-zero emissions industrial sector by midcentury, while keeping and creating high-quality jobs at home and protecting the air and water for surrounding communities.

An Industrial Sector Strategy Is Key

The industrial sector is a major source of GHG emissions. Accounting for direct and indirect (i.e. electricity-use) emissions, it makes up roughly one-third of U.S. GHG emissions. Industrial facilities, often clustered in low-income and communities of color, also produce a long list of air toxics and criteria pollutants. Industrial decarbonization strategies can yield important co-benefits in terms of reducing these health-threatening pollutants, though we also need policies and strategies to ensure pollution reductions and improved public health.

Low- and zero-emissions industrial processes must become more affordable and widely available in the next decade if we are to address these environmental justice burdens and achieve our climate targets. However, efforts to clean up the industrial sector face a series of hurdles: a) under the umbrella of heavy industry are multiple, non-homogeneous sub-sectors; b) many of the technologies to decarbonize industrial production, such as green hydrogen, are still nascent and/or prohibitively expensive; and c) imposing uneven cost burdens on domestic industrial facilities could result in a loss of competitiveness in global markets and/or the offshoring of not only jobs but also climate and other pollution.

We’ve long known how to overcome these barriers for one key decarbonization tool: efficiency options that change management practices for energy efficiency. [See here for a detailed breakdown of what this concept means in practice]. Department of Energy (DOE) and DOE-led international standards for better energy management are a signature program of the agency’s Advanced Manufacturing Office, which the Select Committee’s report proposes to elevate by creating a new position of Assistant Secretary of Manufacturing and Industry. Programs such as this, along with the other components of the plan, would help assure that problem “c” above seldom if ever occurs by making American industry more globally competitive than it is now.

For the other strategies necessary to eliminate industrial emissions, however, we need additional creative solutions.

The Select Committee’s report offers such solutions. The recommendations feature a holistic package of policies that leverages both “carrots” and “sticks,” which decades of experience with clean energy has shown achieves the greatest success at the lowest cost. The carrots include large-scale investment in research, development, demonstration and deployment (RDD&D); tax incentives to help retool domestic industrial facilities to achieve improved performance; and preferential government procurement policies along the lines of the “Buy Clean” law in effect in California. The sticks include emissions performance standards for industrial facilities.

Amongst the key pillars in the report are plans to rapidly develop and deploy industrial energy efficiency technologies; electrify key industrial processes; advance carbon capture storage and utilization options for the sector; make hydrogen available as a zero-emission fuel for use in industry; and cut resource consumption through re-use, recycling, efficiency, and material substitution.

Creating a Robust Innovation Ecosystem

At the heart of the Select Committee’s roadmap for industrial decarbonization is promoting innovation. The recommendations rightly include the full range of investments, procurement policies and standards required to accelerate innovation in American industry. They follow the best practice of encouraging the success of innovation all along the curve of market acceptance from development of new technology to incentivizing its early adoption through various financial and nonmonetary incentives (such as tax credits, loan guarantees, etc.) and, finally, to requiring improvements that are so cost effective to the owners that we don’t need or want to spend public money on them.

Critically, the Select Committee’s report also recommends using the massive purchasing power of the federal government to create a market specifically for low-emission industrial materials and products in order to help scale their production and bring down their costs. Such a federal “Buy Clean” program would set embodied GHG labeling requirements for a range of products and then require the government to take climate pollution into account when determining which companies win contracts. As the Committee notes, a “Buy Clean” policy could be paired with labor procurement standards functioning in largely the same way—i.e. “Buy Fair.”  

Not only is such a policy broadly popular, but as a mechanism for reducing emissions while maintaining a level playing field for domestic industrial facilities, it is especially powerful because it can help federal and state governments address pollution upstream in the supply chain and beyond their own borders.

Technology-Specific Policy Solutions

The report lays out policies for each of the core technology or behavior-change solutions to decarbonize heavy industry. It’s promising to see a list of policies targeted at each decarbonization strategy, as we know we’ll need significant new policy to transform the sector.

First, the report identifies a suite of policies to increase the energy efficiency of industrial operations. Industrial efficiency offers enormous potential to cut pollution while also saving companies money. The recommendations include expansion of grantmaking and technical assistance programs to develop, demonstrate and deploy efficiency technologies at industrial facilities; tax incentives, grants and new financing mechanisms for facilities to become more energy efficient; and standards to require improvements in the efficiency of equipment and processes at industrial facilities. These are commonsense policies that will help take advantage of easily and rapidly attainable energy and pollution reductions.

Next, the recommendations include a strategy to electrify key industrial processes and power them with clean power. Industrial processes require varying levels of heat. Some heat needs can be met with electricity, but the cost of doing so is a barrier for many facilities. The report rightly notes that the federal government should greatly expand its RDD&D efforts for industrial electrification and implement a performance standard to cut emissions from industrial heat sources.

The Select Committee also identifies fuel-switching to “green hydrogen”—produced using electricity from zero-emission and renewable sources like solar and wind—as a key decarbonization lever for heavy industrial facilities like steel plants that require large and consistent amounts of high-temperature heat. This is the first federal legislative document in the U.S. that explicitly spotlights the critical role of hydrogen in the deep decarbonization of the economy and makes specific recommendations to Congress to pass laws to help scale up the industry.

The plan goes well beyond R&D recommendations to set forth a package of policies to enable and promote hydrogen use in the industrial sector. It features three key elements, including tax incentives for industrial hydrogen use and low- and zero-emission hydrogen production; development of hydrogen generation, transportation and storage infrastructure hubs for low- or zero-emission hydrogen use in industry (widely acknowledged as a key barrier to industry scale-up) and rightly beginning with a regional focus on existing industrial hubs; and stronger and expanded RDD&D programs for low- and zero-emission hydrogen with a specific focus on creating new initiatives for industrial uses of hydrogen.

Finally, the Committee’s report notes the need for a holistic view of industrial decarbonization that addresses material feedstocks, waste management and the potential to reduce consumption. The recommendations would take a step toward this end by expanding RDD&D on less polluting and less extractive feedstocks for industry; developing a strategy to advance a “circular economy,” one in which U.S. industry reuses and recycles materials and rethinks product design to avoid waste; and establishing standards to require improvements in recycling, product design and material substitution.

Post COVID-19 Recovery

Too often, industrial sector has become synonymous with economic decline, and industrial job losses are frequently cited in pushback against climate policies. This issue is particular acute now amidst the coronavirus pandemic, as the U.S. faces large declines in industrial production compared to last year.

Rhodium Group, Taking Stock 2020; The COVID-19 Edition

While not specifically addressed by the Special Committee report, any COVID-19 recovery funding for the industrial sector should go toward investments that both cut pollution and improve labor protections, ensuring that growth in the industrial sector produce high-quality jobs.

The Select Committee’s policy recommendations for decarbonizing American industry, if implemented, would embody a clear commitment to making low-carbon industrial production a keystone in U.S. efforts to tackle climate change and build a cleaner, safer and more just economy for all.   

About the Authors

Sasha Stashwick

Senior Advocate, Climate & Clean Energy Program

David B. Goldstein

Energy Co-Director, Climate & Clean Energy Program

Arjun Krishnaswami

Policy Analyst, Climate & Clean Energy Program

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